Market Shocker: Freddie Fires Prez;<BR>CEO Brendsel Also Out

Mortgage giant Freddie Mac shocked the mortgage and bond markets Monday morning, announcing that its long-time chairman and chief executive Leland Brendsel had suddenly retired and that president and chief operating officer David Glenn had been fired.The company said Mr. Glenn had been let go because of "serious questions as to the timeliness and completeness of his cooperation and candor with the board's audit committee...." The company -- which is in the midst of reauditing its books -- said executive vice president Vaughn Clarke had resigned as well. The firm's stock price immediately plunged as news of the shakeup spread through the mortgage industry. One consultant close to Freddie Mac said he expects more firings and resignations in the weeks ahead. Meanwhile, Freddie's regulator, the Office of Federal Housing Enterprise Oversight, issued a statement saying it had created a special investigative team "to assume the review of accounting practices relevant to the restatement process." In the same statement, OFHEO blames Freddie Mac's reaudit woes on "management misjudgments that led to a misapplication of GAAP principles and disclosures of employee misconduct, specifically, altering and failing to supply documents relevant to the restatement process." In the wake of the firing and resignations, Freddie Mac named Gregory Parseghian as its president and CEO, and Shaun O'Malley as non-executive chairman. Paul Peterson has been named COO, and Martin Baumann CFO. In a conference call Monday, Mr. Parseghian tried to calm investors as well as the mortgage market. "Our key assets and capabilities are undiminished by the changes announced today," he said. "We have superior financial strength." Freddie Mac can be found online at http://www.freddiemac.com.